Economic Preview: The economy is still chugging along — but the coronavirus lurks by the side of the road

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Health and Human Services Secretary Alex Azar is spearheading the Trump administration’s response to the coronavirus, a newly emerging threat to the global and U.S. economies.

The huge service side of the economy might shield the U.S. from most of the harm caused by the spreading coronavirus, but it’s increasingly clear it won’t escape unscathed.

The lingering worries about the deadly epidemic, related to SARS, or severe acute respiratory syndrome, have almost rendered last week’s strong U.S. employment report in January an afterthought. While hiring might be good right now, what happens if global trade gets severely disrupted and key segments of the economy are stunted?

“The Chinese economy is starting to reel from the effects of the epidemic and if this turns into a pandemic, then the world economy could be harmed greatly,’ said Joel Naroff of Naroff Economic Advisors.

That truth is all too apparent to exporters and manufacturers that suffered from the U.S. trade war with China. They were hoping the recently signed first stage of a trade deal between the two countries would pave the way for improved sales in 2020, but those dreams are now threatened.

Read: The U.S. created 514,000 fewer jobs in 2018-19 — here’s what that means

It isn’t just companies that do lots of business overseas, either.

Chinese visitors enrich the U.S. tourism and hospitality sectors, for instance, and retailers rely on consumer goods produced in China to stock their shelves. It is a global economy now.

“The growing risks to Chinese and global growth from the emerging coronavirus will likely tarnish some of the shine coming from the U.S. labor market in the months ahead,” contended Scott Anderson, chief economist of Bank of the West.

U.S. investors clearly have the coronavirus on their minds. The stock market has been volatile over the past few weeks, with the Dow Jones Industrial Average DJIA, -0.94%, the S&P 500 index SPX, -0.54% and the Nasdaq Composite Index COMP, -0.54% finishing at all-time highs on Thursday, but pulling back on Friday as investors have been reluctant to head into the weekend long stocks.

Yet damage assessments will have to wait at least a month or two until the full effects of efforts to contain the virus become known.

Read: Coronavirus outbreak poses a new risk to U.S., Fed says

Meanwhile, a flurry of fresh reports this week are likely to show the U.S. began 2020 where it left off in 2019. The economy, powered by robust consumer spending, is growing at a steady pace while inflation remains low.

Take the headliner of the week — retail sales in January. Sales likely rose about 0.3% for the third month in a row, according to economists polled by MarketWatch. That is about what would be expected in an economy that has been growing for a record 10 1/2 years.

Inflation, meanwhile, has been unusually tame in the past year and it isn’t about to show its wilder side soon. The consumer-price index probably rose slightly in January to keep the yearly rate of inflation around 2%.

Read: U.S. adds 225,000 jobs in January as hiring speeds up – labor market ‘astounding’

As it always does, Wall Street will pay close attention to Federal Reserve Chairman Jerome Powell next week when he appears before Congress to take questions for lawmakers.

Powell and the Fed have signaled growing worries about the coronavirus, possibly heightening expectations for another reduction in interest rates in 2020.

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